COMMUNITY BANK AND TRUST
September 13, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
RE: RIN Number 3064-AC50: FDIC Proposed Increase in the Threshold
for the Small Bank CRA Streamlined Examination
Dear Sir or Madam:
I am writing
to strongly support the FDIC’s proposal to raise
the threshold for the streamlined small bank CRA examination to $1
billion without regard to the size of the bank’s holding company.
This would greatly relieve the regulatory burden imposed on many
small banks. I understand that this is not an exemption from CRA
and that my bank would still have to help meet the credit needs of
its entire community and be evaluated by my regulator. In fact, we
are a bank which in recent years has been rated “outstanding” in
or CRA effort and take that obligation very seriously. However, I
believe that this would significantly lower my current regulatory
burden and enable me to concentrate on making loans instead of filling
out unnecessary paperwork.
I also support
the addition of a community development criterion to the small
bank examination
for larger community banks. It appears
to be a significant improvement over the investment test. However,
I urge the FDIC to adopt its original $500 million threshold for
small banks without a CD criterion and only apply the new CD criterion
to community banks greater than $500 million up to $1 billion. As
FDIC examiners know, it has proven extremely difficult for small
banks, especially those in rural areas, to find appropriate CRA qualified
investments in their communities. Many small banks have had to make
regional or statewide investments that are extremely unlikely to
ever benefit the banks’ own communities. I do not believe that
was the intent of Congress when it enacted CRA.
An additional
reason to support the FDIC’s CD criterion is
that it significantly reduces the current regulation’s “cliff
effect.” Today, when a small bank goes over $250 million, it
must completely reorganize its CRA program and begin a massive new
reporting, monitoring and investment program. If the FDIC adopts
its proposal, a state nonmember bank, such as mine, would move from
the small bank examination to an expanded but still streamlined small
bank examination, with the flexibility to mix Community Development
loans, services and investments to meet the new proposed CD criterion.
This would be far more appropriate to the size of the bank, and far
better than subjecting the community bank to the same large bank
examination that applies to $1 trillion banks. I think a more graduated
transition to the large bank examination is a significant improvement
over the current regulation.
I strongly support
the FDIC’s proposal to change the definition
of “community development” from only focusing on low-and
moderate-income area residents to including rural residents. I think
that this change in the definition will go a long way toward eliminating
the current distortions in the regulation. We caution the FDIC to
provide a definition of “rural” that will not be subject
to misuse to favor just affluent residents of rural areas.
In conclusion, I believe that the FDIC has proposed a major improvement
in the CRA regulations, one that much more closely aligns the regulations
with the Community Reinvestment Act itself, and I urge the FDIC to
adopt its proposal, with the recommendations above. I will be happy
to discuss these issues further with you, if that would be helpful.
Yours very truly,
David Lacy
President & CEO
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